SingPost mustn't let US debacle douse its e-commerce ambition

"BETTER late than never" may have flashed through some minds, when Singapore Post (SingPost) said in early April that it was putting its loss-making US subsidiaries on the market.

The sad saga of TradeGlobal and Jagged Peak will always be a story of "damned if you do, damned if you don't". Chief executive Paul Coutts, who inherited a turbulent company in mid-2017, did his bounden duty trying to turn them around but to no avail. SingPost has had to take an impairment of S$185 million for TradeGlobal back in 2017.

Though the problems with the ailing US assets pre-dated Mr Coutts' arrival, he behaved like a first responder who reaches a grisly accident scene and dutifully performs cardiopulmonary resuscitation despite a grim prognosis. Under his watch, investments like automation were introduced to try to turn around the US units.

The efforts may have been costly and also seemingly ineffective, since he is now looking for buyers of the subsidiaries. But with e-commerce a genuine growth prospect, the lessons from managing TradeGlobal and Jagged Peak may not have been in vain.

With US consumer retail in the doldrums, e-commerce was less a first-mover advantage and more of a last resort. But in Singapore, and elsewhere in the region, the picture is starkly different. Backed by Alibaba, SingPost must know South-east Asia remains ripe for the picking.

The planned sale would "free up resources and management attention for the Asia-Pacific operations, where the company has a more natural competitive advantage than in the US", Standard & Poor's analysts Pauline Tang and Bertrand Jabouley wrote.

It is true that the region is not short of logistics startups eager to dip their fingers into the last-mile delivery pie. Some come with gilded pedigrees, such as Keppel Telecommunications & Transportation's UrbanFox, which got a S$17 million funding injection from its parent last year.

But "we can rebuild him - we have the technology", as the catchphrase of The Six Million Dollar Man ran.

After all, SingPost noted in its latest annual report that its e-commerce businesses were served by a proprietary software solution with cross-border and other capabilities.

It also has the postal experience and infrastructure to rebuild itself for a new era of doorstep deliveries. The recent woes faced by grocery startup Honestbee - which is reportedly looking to sell, too - show that newcomers still have their work cut out for them.

Despite postal service failures that have rightly got SingPost rapped on the knuckles by the regulator, the legacy business' woes may stem from a labour crunch, rather than structural industry deficiencies, as e-commerce-related parcels more than make up for the decline in traditional mail.

DBS analyst Sachin Mittal has argued that international mail growth "is likely to suffer from a hike in terminal dues" in the near future - but he may have underestimated consumers' demand for cross-border online shopping.

SingPost's core post and parcel business still posted the highest revenue growth of all business segments - 9 per cent year on year - in the third quarter ended Dec 31, 2018, while operating profit was up by 10 per cent at S$47.6 million.

With parcel growth on track to keep swelling, SingPost's core business just needs other kinks in the local postal business to be ironed out.

One challenge is SingPost's role in maintaining public letterboxes, post offices and all that jazz.

As letters die their slow and painful death, the market sustainability of being a public postal licensee may become more doubtful - effectively raising the question of whether a publicly listed company can be asked to subsidise the survival of a public service.

Even if the prospect of a nationalised postal service is unlikely, SingPost and the authorities could still work out an operations or management deal that frees up the company from heavy capex investment in return for a fee - similar to what the authorities have pulled off with Singapore's rail and bus system.

Such a plan might even offer the best of both worlds: The state doesn't have to be directly involved in running the postal service while SingPost can invest more to tap Asia's e-commerce boom.

TradeGlobal and Jagged Peak may have been harsh lessons, but once they exit the stage, SingPost could have breathing room at long last.